PT Freeport Indonesia’s contract at Grasberg Mine, Papua, will end in 2021. The government promises to extend the operation permit up to 2031 and can be extended until 2041 if Freeport Indonesia meets the requirements of the government.

An extension will be granted if Freeport Indonesia divests 51% of shares to the government, builds a domestic smelter to refine all its production, and increases revenue for the state.

Many have questioned why the Freeport Indonesia contract has to be extended again, why not be allowed to finish in 2021 then the Grasberg Mine is handed over to the government.

Minister of Energy and Mineral Resources (ESDM) Ignasius Jonan revealed, if the contract with Freeport Indonesia is not continued, then the possibility is given to foreign contractors. Jonan failed to grant operational rights to Indonesian companies as Freeport Indonesia’s underground mining operation is not easy.

“If it is not possible to extend, it can be handover to another foreign contractors. What if we handover the mine to ANTAM (Indonesian state owned mining company)? I am sure they can’t handle it” said Jonan during a Working Meeting with Commission VII DPR, Jakarta, Thursday (25/1/2018).

The complexity of Freeport Indonesia’s mining operations, said Jonan, is due to the underground mine site of up to 700 kilometers (km). This underground mining operation is one of the most complicated in the world.

“Because we don’t have experience and expertise to run underground copper mine with 700 km long and we have never managed this super-complex mine, even in the world it is one of the most complex engineering designs ever built for underground mines,” says Jonan.

The second alternative offered by Jonan is to attract foreign investors to manage the mines after the expiration of the contract in 2021. However, if the government stops the unilateral contract post 2021 early, it is feared Freeport Indonesia mine is no longer operating since now.

“If you wait for 2021 and so they will not do anything until 2021. If we failed the negotiation, then we as government must take another action, not to extend the permit for example, or another possible option and so on,” said Jonan.